If complementary product lines is one consideration in successful mergers, another one might very well be a shared set of values and a vision to tackle the future challenges and opportunities facing an organization.
In that context, I am thinking that maybe CBS/CNET and NYT/About.com would make for good merger buddies. I will give this some more thought… but this is a potentially interesting merger not only because of the fits in terms of content and media, but also because both management teams seem to be opening up their data more and more.
If the NYT is indeed about to open up its content via APIs, then NYT is essentially about to do what CBS has started to do with some of their video content. Of course, Web 1.0 (1994-2003) hammered print media companies, and I think Web 2.0 (2004-present) is nailing TV-centric media companies… which explains why TV-centric media companies like News Corp., CBS, Disney and NBC are displaying schizophrenic and multiple personality disorders: on the one hand, they want their content everywhere, but they fear giving up control so the two sides of their brain don’t seem to get along (forget their limbs!)
Anyway, what is also interesting, frankly, is that apart from visions to open up, the content starts to fit well:
- NYT/About.com and CBS are very news, sports, entertainment and lifestyle oriented,
whereas
- CNET is extremely tech-oriented.
This would mesh well across media.
- NYT.com, CNET and About.com are actually pretty strong online,
- CBS is extremely strong in TV, radio and outdoors. It lacks print (it does own Simon & Schuster, the venerable publishing house) but it can certainly cross-promote talent well.
Of course, this would not be a merger per se, rather, an acqusition. CBS just paid $1.8B for CNET and combined that would be worth $15B.
NYT is worth some $2.5B… but with shareholder activists, bigger media companies and hedge funds gunning for the company, would a sale to CBS for shares and or cash be so bad? I don’t know. It would help the Sulzbergers find a home at CBS. Incidentally, the Sulzbergers are otherwise looking at landing at Rupert Murdoch’s News Corp., who last year bought Dow Jones, publisher of Wall Street Journal and Barron’s for over $5B. We can see the Rupert Murdoch vs. Sumner Redstone rivalry escalating before our eyes…
I am not sure if this will happen… but crazier things have happened.
You try not to read too much into this, but NYT is being pursued by activist shareholders, then its subsidiary About.com sees its CEO Scott Meyer resign… the company line is that this was amicable and planned.
Maybe. But then why is NYT Digital dean Martin Nisenholtz taking over?
I don’t know… but maybe I should go ahead and buy About.com and reposition it for the upcoming video revolution (Oh, wait. It’s already started)?
Does anyone have $500M or so to front me? I’ll pay it back…
For the longest time, I’ve been hinting at private equity firms to give me a call so we can rescue Yahoo! That might happen, it might not. But to pull that off, you need a good $40B or so. With Yahoo! at $25B - and reporting earnings as we speak - it might happen.
But today, an easier target. No, I’m not talking about CNET - though I’d love to manage CNET and whip it into shape, too. CNET is in fact facing a hostile takeover from Jana Partners, who has built up a 20% stake in the company.
I’m talking about About.com, the company founded by Scott Kurnit, first sold to Primedia for $690M, then unloaded to the New York Times for $410M in 2005.
Just this past Sunday, I mentioned that I was surprised at how little NYT had invested in developing the videos on About.com. I mentioned that with much lesser resources, we had built a video library twice the size of About.com.
Anyway, Alley Insider is now reporting that NYT wants to sell About.com :
It’s on track to do about $100 million in revenue for 2007, and perhaps $30 million in operating profit, up from $44 million and $11.7 million in 2005 (those numbers include results from recent acquisitions like ConsumerSearch–$33 million purchase price–and UCompareHealthCare.com, $2.3 million). At a 15x Ebitda multiple, About could fetch $450 million. Bump that up to 20x, and it looks a little better: $600 million.
I think About.com will have a hard time finding a buyer because big buyers won’t know what to do with it. With so much focus on social media and networking, an old school Web 1.0 company such as About.com won’t be able to command $500M from many obvious buyers because such companies would rather spend $500M on more high growth opportunities - basic risk and return.
So devoid of such upside, here’s my two not-so-subtle suggestion:
- Lend me $500M.
- We’ll buy About.com for $500M
- We’ll leverage our expertise and library at WatchMojo.com and invest some of that $30M in profits in developing About.com in a video content powerhouse to match its text content strength.
- We’ll integrate our MetaMojo.com vertical search technology to better develop and profit from niche vertical opportunities.
- We’ll let About.com’s columnists use the BloggerMojo.com blog network to publish timely pieces that drive traffic back to the millions of pages deep within About.com.
- We’ll use the StreetMojo.com application and create mini comminities matching users with marketers (b2c) and users with users (c2c).
Overnight - or in 1 quarter - About.com goes from a really useful but stagnant old, new media company, to a rapidly growing company with considerable exposure to both social media and video.
Adding our existing video content alone on About.com’s thousand of SEO-optimized pages alone would reap considerable strategic value. But with video advertising set to cross $1B in 2008 - and cross $7B in 2012 in the US alone - I am pretty sure that I can make About.com be a $10B market cap company in 5 years (7x growth in video market alone in 4 years).
Let’s face it, About.com can attempt to build up video alone etc., but within About.com, that will be hard. With About.com being a part of NYT, it’s impossible.
Something tells me that making a run at CNET is counter-productive. They don’t seem to be a willing, motivated seller. But NYT Company? I think they’d sell that puppy to me in a heartbeat.
Now all I need is a banker. A private banker with $500,000,000.00. Hmm. Where can I find that?
Any takers?
Related:
Shareholder activism.
Get used to it. Something tells me that we’re going to see more and more of this. As a Yahoo! shareholder with a 6-digit investment in the company, I am personally growing tired of Yahoo!’s direction, management and rhetoric. Last week I published a post called “Memo to Yahoo!: Barbarians at the Gates.”
CNET has braced itself for a hostile takeover from Jana Partners.
It’s not just new media, old media is also getting the similar treatment.
As reported in the NYT itself (pretty cool, I must say):
An Alabama-based hedge fund gave notice Friday that it would try to elect directors to The New York Times Company board, a day after the same hedge fund gave similar notice to another newspaper company, Media General.
The hedge fund, Harbinger Capital Partners, a part of the Harbert Management Corporation, controls less than 5 percent of Times Company stock, a level that would require a declaration to federal regulators. It has accumulated control of more than 18 percent of Media General stock.
Of course, due to these companies dual class share structure, the ownership in percentage terms by any one shareholder - be it individual or institution - is meaningless:
Even if it was successful in electing a slate of directors, Harbinger would not be able to take control of the board without an about-face by the controlling family at each company.
At the Times Company, the Sulzberger family owns the great majority of the Class B stock, which elects 9 of the 13 directors. The Bryan family, longtime owners of Media General, holds a similar position. Both families have stated that they do not intend to sell or to abandon the two-class arrangement that preserves their control.
Are the families running these companies realistic in wanting to preserve such structures? It depends. It’s complicated, that is for sure. You have to respect ownership and such great families who have contributed so much to the history and legacy of publishing. But, on the flip side, you have to honor your fiduciary duty to shareholders once you decide to accept the public’s money. This is a difficult balance to maintain.
In a statement, Arthur Sulzberger Jr., chairman of the Times Company, said, “We have a strong and independent board, but our board’s nominating and governance committee will review the nominations and make a recommendation to our shareholders in due course.”
Words are cheap, critics would say. The market is right and the market is not very encouraging.
Times Company stock, which traded as high as $53 in 2002, closed Friday at $14.66. The company remains profitable — through three quarters of last year, it reported net income of $155.7 million, or $1.08 a share — but like the entire industry, it has been hurt by falling advertising revenue.
In addition to The New York Times, the company owns The Boston Globe, The International Herald Tribune and 15 other newspapers, and a number of Web sites, including About.com.
Digital Dreams
Ah yes, About.com. I listed NYT’s purchase of About.com as one of the best Web M&A deals of all time. I included that deal when I published the list all the way back in Fall of 2006. But now, it’s been 18 months since that list was published, but more importantly, it’s been 3 years since the deal took place. The deal was pretty cheap, at $410M, relative to prices these days. But how much has the NYT leveraged About.com to accelerate its digital strategy? I don’t know.
I commend the NYT for investing in Wordpress (HipMojo.com is powered on Wordpress), and NYT is extremely progressive with its overall digital strategy.
Martin Nisenholtz seems to be one of the most gifted digital heads of a traditional media company, and this explains why NYT is a massive online operation and the largest of any print company’s… but why is it not more?
Missed Opportunities
From my vantage point, I am shocked, for example, at some of About.com’s missed opportunities.
Take for example About.com’s relative lack of video content (disclaimer: WatchMojo.com has pitched About.com numerous times on a video content partnership). Consider the video library available on About.com:
food - 441 videos
health - 270
home and garden - 180
computing & technology - 221
parenting - 134
style - 43
autos - 20
electronics & gadgets - 25
travel - 65
cities & town - 37
entertainment - 74
business & finance - 55
A quick calculation shows that the final count is a “mere” 1,500 videos. That’s not bad compared to most media organizations’ library size, but come on: 1,500?
WatchMojo.com is a self-funded, bootstrapped startup with a (relatively speaking) tiny staff and we have more than twice that many videos since launching two years ago on January 23, 2006. Two years ago!
That’s inexcusable, especially since online video is very much incremental for print media companies (though it is cannibalistic for TV companies). All in all, I’m not sure what will happen with Harbinger Capital Partners’ efforts, but if the situation at CNET is any indication, this story will be popping up in the headlines in the weeks and months to come.
Related:
- Can Magazines Create Video Content?
- Digital Revenues are Never Incremental for Old Media
- How To Videos: Demonstrating vs. Storytelling
Within the last eight months, About.com has made two acquisitions and today made its third one, according to the NYT.
One was a Web site that provides access to information about hospitals, nursing homes, clinics and doctors, UCompareHealthCare.com.
The other was a site that offers weight-loss tools and nutritional information, Calorie-Count.com.
Today’s acquisition was for ConsumerSearch.com, a Web site that compiles reviews of consumer products, for $33 million in cash.
About.com was acquired by the NY Time company for $410M, in one of our Top 10 Best Web Acquisitions of All Time.
PLAY
